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My First MillionJesse Pujji on Bootstrapping a +$1B Business + Selling To The Ultra Rich
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EVERY SPOKEN WORD
85 min read · 16,684 words- 0:00 – 3:05
Unique insight + unfair advantage
- SPShaan Puri
You said a couple interesting things. So let's, let's break this down.
- SPSpeaker
We have no money. We're bootstrapping. Let's get ourselves on GLG as experts. And I'm like, "Okay, my, my charge is $500 an hour." She goes, "No problem." But we talked to, like, someone after a few weeks, and he goes, "Do you guys have research?" And we, we looked at each other. We're like, "Yeah, yeah, we have a report. It's $5,000." So I always joke that was Ampush's angels round. We raised $150,000 selling research reports to hedge fund people. [laughs]
- SPSam Parr
That's pretty sick.
- SPShaan Puri
That's an amazing story. [laughs]
- SPSpeaker
And by the way, there's eight of them that all have, like, high eight or low nine figures in EBITDA. The whole category has just crushed.
- SPShaan Puri
The two takeaways from this, by the way, are sell to the rich, and then your way of figuring out what they need was [upbeat music] Jesse, what up, dude? How are you doing, man?
- SPSpeaker
What's up, guys? I'm pumped to be on here.
- SPShaan Puri
Good to see you. Uh, where should we start? You sent us a doc, had a bunch of cool ideas on it. Which, which one do you wanna start with?
- SPSpeaker
Yeah, I mean, maybe, maybe some of the stuff we've learned at GatewayX as we've been building new ideas. I think the idea I'm most excited about, which I think, Shaan, you and I have talked about, is Aux Insights.
- SPShaan Puri
Sam, do you know about this business?
- SPSam Parr
No. What is Aux Insights?
- SPShaan Puri
Oh, dude, this is sick. Okay. S- tell us about this business.
- SPSpeaker
You're, you're gonna love it, Sam. So, you know, one of the things I, I... as we've learned starting new businesses, and some of them you guys probably know, like Kahani. Shaan, you were a customer of it. It failed. It didn't... Or we stopped doing it. And one thing I've learned sitting in this seat is it's really important to, like, understand demand and that there's a customer who has a problem that you need, and then go l- like stand up the thing. With Growth Assistant, that's what I did. I already knew people needed it, and I just stood it up and then... and immediately started to work. And so, you know, I started my career in finance and consulting. I went to Penn. I got a million friends who were in private equity. And after we sold Ampush, I would get a call from one friend once a month without fail, who worked at s- Blackstone or worked at TPG or worked at one of these fancy private equity firms. And they'd go, "Hey, I, um, I have this deal in front of my investment committee. It's a billion-dollar company. And I'm getting asked all these questions about their Google and Facebook ads, Jesse. Like, what if they don't perform well, or how do we know they're good at them? And they're asking me to, like, look at the web traffic and make some analysis. D- Jesse, I have no idea. And my, my investment committee's not happy 'cause I can't convince them to buy this business. What should I ask them?" So the first few calls, I'm like, well, the same thing you, any of us would do. Well, go look at the Google Analytics. Well, how many, how many creatives are they testing? My fourth guy was like, "Dude, can you just do this for me?" And I'm like, you know me, I'm like, "Well, yeah, a couple hundred thousand dollars, I'll do it for you." [laughs] And he's like, "Oh, that's it? Yeah, done. Let's go do this." And so Aux Insights is essentially a private equity consulting business that works for private equity firms, specifically in the office of the CMO, marketing related diligence, and what, what's called value creation. So value creation is after they buy the business. They want you to spend time helping them put together the strategy for how they grow the business. And there's businesses like Accordion's a cool example. 300 million in revenue, 100 million in EBITDA. It's only a 12-year-old company. They do the same exact business for office of the CFO.
- SPSam Parr
What?
- SPSpeaker
So anything finance related, yeah. Accordion. I mean, you could look at LEK is
- 3:05 – 14:00
How Jesse bootstrapped Ampush using GLG
- SPSpeaker
800 million and 250 in EBITDA. McKinsey has an over billion dollar business just for private equity firms that's got 55% EBITDA margins.
- SPShaan Puri
And when you say they're office of the CFO, so let's, let's break this down. So you said a couple interesting things. The first was it's a lot easier [laughs] to succeed in business if you first find the starving crowd. So find the really hungry market versus how you and I, Sam, like started, or at least I should just speak for myself. I don't know if you did the same thing. But, like, I would always be like, "What's a cool idea?"
- SPSpeaker
Yeah.
- SPShaan Puri
Or, "What's something I could make?" Or, "What's something that seems easy to do?" And it was easy at the start because it's so familiar, or it's, like, just nearby, but I have no idea the demand, or the demand is all in other broke people like me, so it's gonna be really hard to sell and make money, or I need so many customers to make money. Whereas you're like, "Well, let me work backwards. Who are the richest people and [laughs] richest companies?" It's like pri- private equity, hedge funds, that type of customer.
- SPSpeaker
They're not price sensitive at all. They're urgent.
- SPShaan Puri
And they're super rational. They're like, "Cool, if I can buy something for $100,000, but it's gonna help me make a $10 million decision, great. Uh, you know, the, the, the math maths. I'm in." So they're, they're, they're wealthy. They're not as price sensitive. They're rational. And in your case, you figured out what the need was because you had one fortunate circumstance, which was, like, they were calling you to ask you about this thing, and you basically... W- so, so what you built was, like, a marketing due diligence. So they're-
- SPSpeaker
Yep
- SPShaan Puri
... looking at a company. They need to know is there... are there digital ads performing very well? Not so good? Is there any red flags in here? Any concerns? In the same way that if I wanna go buy a company and I get a bunch of financial statements, I might ask a super financially literate friend-
- SPSpeaker
An accountant to go look at it, yeah
- SPShaan Puri
... yeah, like, "Hey, my accountant," like, "Can you look at this? Can we do a quality of earnings? Can we g- can we get some understanding of, like, are these numbers solid or not?" They are really financially literate, but they're not as Facebook ads and Google ads and Pinterest ads-
- SPSpeaker
Right
- SPShaan Puri
... literate as you are. So you're providing that diligence. And then after they buy, then you're like, "Cool, and then we'll help you, like, lever- w- we'll show you some levers that might be able to grow this, this thing-
- SPSpeaker
Right
- SPShaan Puri
... after you buy to, to create the value, right?
- SPSam Parr
You should give background. So you started and sold Ampush for some tens of millions, I think, dollars.
- SPSpeaker
Yeah.
- SPShaan Puri
Which was a digital, digital marketing agency.
- SPSam Parr
And then with that money you went and started GatewayX, which is almost an incubator.
- SPSpeaker
Yeah, we call it a studio and hold co.
- SPSam Parr
Where you have started three or four or five businesses.
- SPSpeaker
We've started six. We've shut down two. One is kinda going sideways. Two have crushed it, Aux being one of them, and one is new.
- SPSam Parr
Got it. Okay.
- SPSpeaker
And, and let me jump in and say two things. We... What we call it at GatewayX in the studio, Shaan, is we have to have a unique insight and an unfair advantage. W- I wanna build, like, in 10 years, I want this, like, hold co studio thing where we've got 5 to 15, I don't care what the number is, operating companies. They're all profitable. They're compounding on top of each other, and we've got this super cool culture of builders basically inside of it.
- SPShaan Puri
You don't raise money at the start for them, right? Assume that.
- SPSpeaker
We don't raise money. We tried it w- with Kahani, as you know, and, and it didn't work. Like, it wasn't... It just wasn't for me, I shouldn't say. It was fine, just wasn't for me.
- SPSam Parr
What, what, what's Kahani?
- SPSpeaker
Well, it was a great example of Shaan's point of d- like, a cool idea, so that you're gonna-
- SPShaan Puri
Yes
- SPSpeaker
... think the idea is cool the second I tell it to you in sh- in, like, a shitty idea business I was like, "Look, e-commerce sites look like they're 10 years old, and meanwhile, Instagram and TikTok have got these, like, full vertical videos. So let's make a plugin to let e-commerce companies change themselves to look more like TikTok and Instagram." So the first product was the little stories nav bar at the top of, of every e-commerce site, and we had it on Shaan's site. And I was like, "Oh, it's gonna... People are gonna engage with it. The content's gonna look bigger. It's gonna..." And we launched it, and everybody... People thought it was a really cool idea, right? But nobody actually, like Shaan-
- SPShaan Puri
Me included, by the way. I, I thought it was an awesome idea. In fact, I kinda still think it's an awesome idea. That's how sick I am. [laughs]
- 14:00 – 20:30
Digital marketing in masterclass in 3 minutes
- SPSpeaker
like you've got four weeks. They're trying to discern whether they wanna buy the business. And you're just like, your head, you have so much data, you have to figure out what's going on and be able to give them a smart answer. Value creation, you have 12 or 20 weeks sometimes, depending on the engagement. There we will definitely run experiments. We'll make ad changes. We'll do all these things and come back to them and say, "Hey, this is a good idea. This is not a good idea."
- SPSam Parr
So to make this actionable, like even for me or Shaan or a listener, what do you look for? Like, what can I look for in my bus- And I assume, obviously, this is only if you are running digital ads, Facebook and Google basically ads. What can you look for to be like, "There's opportunity here," or, "This is stupid. Shut it down"?
- SPSpeaker
Yeah. The, I mean, we, we approach it in a few different ways, right? One is top-down. Like we use Veros and a couple other third-party data sources and our own data to figure out benchmarks of the company. So if you're an e-commerce business with a ... You're selling water bottles, what should your click-through rate, what's your conversion rate by channel? What ... That's our top-down way of kind of assessing where they stand. And so that's just whatever. You can get that data anywhere online. And then the bottom-up part of it is, for example, for Facebook, right? We'll say like, is the account structured correctly? Oftentimes there's too many ads trying to ... Like breaking the signal in too many different places, and it needs to be consolidated. The other question we'll ask is, is their event match quality good? Oftentimes these old, old-school companies owned by private equity, they don't even, they have like a 3 out of 10 match quality, which means Facebook's signal is super crappy for them. And I bet Shaan's company and most startups have 9 out of 10, 'cause they've like major da- Facebook's getting all the right data. Then there's all the creative stuff. Are they, you know, the easiest thing, someone says, "My performance is bad." I'm go, "How many creative do you test a week?" "A week? What are you talking about? Oh, we do two a month." Well, yeah, of course your performance is gonna be horrible, right? So creative testing is one of the easiest levers to pull in terms of improving Facebook's performance.
- SPSam Parr
And if a business that you're looking to buy has all of these things that they're doing wrong, and they're still succeeding, and you, for you, you're like, "There's opportunity here. If they get this right, you're gonna be even better at providing this business."
- SPSpeaker
Exactly. And size, right? So the key deliverable, the first five slides of every deck are here's the grade for every channel, and then here's the waterfall that says what's your current EBITDA. And then if you improve the things that we think in a pretty moderate way, here's what your EBITDA of the business could be. And that's the money chart for a private equity guy.
- SPSam Parr
That's pretty sick.
- SPSpeaker
Yeah. It's, it's a super cool business. And, and honestly, like the validation that we've gotten, like that's the other cool thing, is if my ... One of my other tests for a business is if in my discovery phase people start asking me to buy it, I know I'm onto ... Like, that's what happened with Growth Assistant. That, that's what happened with Aux. In early days of Ampush, that happened. I was like, "Hey, this is an idea we have. We wanna get you offshore marketing people." And they're like, "Can I get one of those people?" And I'm like, "Oh, okay. We're good." Same thing with the private equity guy. I call some of my buddies. I go, "Here's this idea we have, we wanna do." He's like, "Oh, I actually have a deal right now. Can you guys start looking at it?"
- SPSam Parr
That's awesome. How big is this business now? Is it a year old? Could you say like-
- SPSpeaker
It's a year old.
- SPSam Parr
Like in year one-
- SPSpeaker
Yeah, I'd say it's like 5 million. It'll do 5 million this year.
- SPSam Parr
Dude, that's insane.
- SPSpeaker
And, yeah, it'll do 5 million. And we, by the way, we invested one-tenth of what we put into Kahani into it.
- SPShaan Puri
And by the way, Sam, like, I think the, the key ... 'Cause you were like, "What are the marketing levers?" And, like, he gave you like a as good as an answer you give not having, like, the thing you need. It's like, "Doctor, what can I do to be better? But here's none of my data and none of my scans and none of my numbers."
- SPSam Parr
Yeah.
- SPShaan Puri
It's like, "Well, you should, I guess, you know, check on your health." So the key here with this business though is it's ... A- and he won't say this, it's not part of his sales pitch, but, like, it's not that he has to be like this marketing savant that's gonna, like, find the genius levers. These companies are really buying certainty, and it's, it's CYA, right? It's why p- a lot of consultants get hired in the world, is, is there's a CYA component. You're doing a deal. You need to understand that the thing you're buying doesn't have any, like, you know, hor- horrible warts. That's the first piece.
- SPSam Parr
Yep.
- SPShaan Puri
And then, cool, what is a, like, best case, base case, worst case kind of scenario of what we can do to grow this thing? And it's not even like a specific tactic, like, oh, change the audience segmentation, but it's like we need a plan made by people who know a lot about this. And that's enough to, like, kind of move the ball forward. And then of course, like when you could go in and you actually do the shit, you'll figure it out case by case. Like, there's not like ... Like, you go to 100 e-commerce companies, and you could take the 10 smartest people in Facebook Ads and Google Ads, they're gonna give you 10 different answers for every single company because one guy likes cost caps, another guy likes ASC, another guy says-
- SPSpeaker
Right
- SPShaan Puri
... "Simplify the structure," another guy says, "Use all the new shit." You know, another guy says, "Do this attribution method," another guy says this. There's no real uniform answer for, like, how do you do ... How does this work better versus worse?
- SPSpeaker
Yeah. Well, I'll, I'll disagree. Like, I'll show you. Uh, can I share my screen?
- SPSam Parr
Yeah, yeah.
- SPSpeaker
I mean, this is an example-
- SPSam Parr
I can share at the bottom
- SPSpeaker
... of the internal tool or the internal, like, analysis to give you the detailed answer, Sam, of, like, everything we look at When we're trying to assess and grade inside of a private equity, right? So there ... It's top down, it's bottom up, how much spend is getting spent, please, what's the campaign structure, what's ... how fast are they-
- SPSam Parr
You made this?
- SPSpeaker
I mean, my, my team made this, yeah.
- SPSam Parr
That's so cool. [laughs]
- SPSpeaker
Um, so this is what we go through and do, and we're gonna turn this into software at some point, by the way.
- SPShaan Puri
Any, any color-coded Excel sheet, we're like, "Ah, this is fucking great."
- 20:30 – 27:38
How to sell to the ultra rich
- SPSam Parr
Wow. What a cool business. Good job. [laughs]
- SPSpeaker
Thank you.
- SPShaan Puri
[laughs]
- SPSpeaker
Much better than Kahani.
- SPShaan Puri
So, so your thing was, like, kind of office for the CMO. You talked about how Accordion and the ... there's, there's the equivalent for the CFO side. Can you talk about other businesses that are like this that sell to the, like, ultra rich customers? So let's call it hedge funds-
- SPSpeaker
Yeah, yeah
- SPShaan Puri
... investment banks, whatever. I heard you talk about a business that I had never heard of called I think it was First Ringed or First Ringed or something.
- SPSpeaker
First Rain. Ugh.
- SPShaan Puri
What is that? W- that sounded very interesting.
- SPSpeaker
Well, the first thing I always tell people, I go like, "Who's the richest man in New York? Sam, who's the richest man in New York?"
- SPSam Parr
I don't wanna ruin your story.
- SPSpeaker
Okay, fine.
- SPSam Parr
So I'll say-
- SPSpeaker
All right.
- SPSam Parr
I'll, I'll-
- SPSpeaker
Who's the, who's the richest man in New York? [laughs]
- SPShaan Puri
[laughs]
- SPSam Parr
You think it's-
- SPShaan Puri
Here's the homie guess. Uh-
- SPSam Parr
I hear. The homie guess. A hedge fund guy.
- SPShaan Puri
Some real estate guy.
- SPSpeaker
Yeah. Daniel Och or Steve Schwarzman or whatever. Nope, nope, nope. It's Michael Bloomberg. It's the guy who's selling information. And so sitting at Goldman, I, like, had this terminal we were paying $1,200 a month for, and, you know, they never negotiate price. Every single terminal, they never do volume discounts. And you're like, damn, this guy's just ... I mean, they're printing money in that business.
- SPSam Parr
It also helps that he owns the entire thing.
- SPSpeaker
He owns the entire thing, but dude, he ... whether he did or didn't, it ... the thing makes, like, five, 10 billion a year in EBITDA.
- SPSam Parr
It's huge.
- SPSpeaker
It's a ridiculous business, right? And so I'm sitting there, I'm an entrepreneurial person, and, and my boss comes up to me and she goes, "You gotta set up First Rain, Jesse." And I'm like, "Oh, cool, cool. What's First Rain?" And I'm, like, looking through it, and it's like pull the stock ticker and get an alert to your inbox when there's news about this company. And I'm like, "This is just Google Alerts."
- SPShaan Puri
[laughs]
- SPSpeaker
J- she's like, "What's Google Alerts?" [laughs]
- SPShaan Puri
[laughs]
- SPSpeaker
And, and I'm like, "What do we pay a month for this?" She's like, "Oh, we pay, like, $2,000 per license." And I'm like, "Well, our group is, like, 40 people. Like, we're paying $80,000." "No, no, we got a discount. It's $50,000 a month we're paying for, for this Google Analytics thing." I'm like, what the fuck? And so, you know, one of the, one of the categories for us now ... And, and again, remember, unfair advantage is very important. I, I happen to have lots of friends in this world 'cause of where I went to college. Just whatever, unfair advantage.
- 27:38 – 32:40
Red Ventures' Playbook
- SPSpeaker
and decided not to buy the rest of our business, so we ended up eventually selling it to someone else. But we did for basically-
- SPSam Parr
But you got to know them
- SPSpeaker
... for two years we operated as one company, 'cause the plan was originally for them to buy us. So I know them and Rick incredibly well.
- SPSam Parr
Do you know about this company, Shaan, Red Ventures?
- SPShaan Puri
I know about the surface level. And actually, we've, uh, we've hit up Jesse being like, "Dude, this is fascinating. Should we get Rick on?" Like, and he, and I would, I wanna know more.
- SPSam Parr
Well, but there's one part of the story-
- SPShaan Puri
Okay
- SPSam Parr
... that I just wanna mention, which was amazing, is like he started this thing, and then he was actually on the plane, uh, that Sully-
- SPShaan Puri
Yes, with Sully
- SPSam Parr
... landed in the, in the Hudson. And he like gave this like amazing talk when he w- he was like, "I was like one or two years into my business." And for some reason-
- SPSpeaker
Yeah
- SPSam Parr
... that life and death, that life or death situation kind of changed his outlook on life. And now Red Ventures is known as like one of the best places to work. And it sounds like they're, it's a great company. So yeah. T- what's the background?
- SPSpeaker
Yeah. So the story, the way that they tell it, they started the business in 2000. So Rick and Dan are the founders, and they're both friends and both multi-billionaires. And they, they actually met at Sendant in the late '90s. You guys know what Sendant is? They had like the, the coupon book. They launched Orbitz. They were like the original internet holdco. They met there, very direct marketing heavy. So in 2000, the two of them broke off on their own. Literally months before the internet imploded, they started, uh, Red F is what it was first called. Five years later, in their, their story they're telling of it, not mine, Rick says, "Dan, give me a dollar." Dan gives him a dollar. He goes, "You can have my half of the business. I hate this business. I don't wanna do it." So they do a hard reset. Five years in, I think they barely were doing a million in EBITDA. And like these guys are the best learners you've ever met. So then at the time, go back to 2005, there was this new thing called Google AdWords, and there was agencies starting and there's, were lead gen businesses. And they, for whatever reason, they had a relationship with DirecTV. They said, "Hey..." D- DirecTV, if you remember back then, was looking for satellite people to sell in the mall, like, their, these resellers. So Rick or one of them had this idea of, "Let's go to g- go to DirecTV and become a dealer." So they go, "Hey, DirecTV, we wanna be a dealer." They go, "Sure. W- we love dealers. What's your territory?" They go, "Oh, this new thing called the internet will be our territory." [laughs] They go, "Okay, sure. [laughs] We don't know anything." So they became DirecStar TV, authorized dealer of DirecTV, but as a part of their thing, they owned all the web rights, they owned all the AdWords rights, they owned all the SEO. And in four years they built a $75 million EBITDA business just selling DirecTV subscriptions. Because they would run the media, take the phone calls, and all these things that are commonplace today, where like what you do on your website gets cookied, and then you know on the phone call, they were, they were pioneers in all of that stuff.
- SPSam Parr
And basically if, if someone became a reseller of the TV tech, uh, Dish Network or whoever it was, DirecTV, they gave Red Ventures like $1,000.
- SPSpeaker
They get $500 bounty-
- SPSam Parr
Yeah
- SPSpeaker
... for every single customer they get, and Red Ventures just had to do it for less than that, right? And so between their media... And of course, after a few years, DirecTV's like, "Well, we can't get rid of you because you're driving all of our customers, but we don't like the deal we made." So then they renegotiated a million different times and I, you know, they still probably work with them. But then they went and took that out, and then General Atlantic, the big private equity firm, invested and has crushed it on that deal. And they Um, they went and did that for any high LTV purchase you can imagine. So every credit card company worked with them, American Express, um, Verizon Wireless, people who sell pest control. Like anything that was like a long-term purchase, basically Red Ventures was either running their marketing... And, and when they invested in us, we wanted to do the same deal for direct-to-consumer companies, which did not work nearly as well as it worked for them, which is a different story for a different day. But that's what they got to. Then they got to 2015, they're doing two, 200, 300 in EBITDA, and there's no more growth left, which is why they invested in us and they bought... They did, they did a bunch of other things. Like Rick's really smart, and he goes, "Okay, I'm gonna invest in Jesse." He did five other deals at the same time, same year. And a year later, Ampush is going okay. The other one went down to zero. One, you know... But they bought an SEO business that they used their same playbook, and within nine months they took it from three in EBITDA to nine in EBITDA. And they go, "Oh shit, so that worked. Okay, let's go do a bigger deal." So then they bought like a $10 million EBITDA SEO content business, and they took it to like 25.
- SPSam Parr
When you say SEO content business, you're talking about like, uh, The Points Guy l-
- SPSpeaker
Yeah, the first one-
- SPSam Parr
Yeah
- SPSpeaker
... was reviews.com. The second one, I'm forgetting the name of it, but yeah, like The Points... Then they finally, Rick like did a couple of those and Rick's like, "All right, I'm ready for the big time." He went and bought Bankrate, which is a billion-dollar publicly traded company, for 100 in EBITDA. It owns The Points Guy, it owns creditcards.com, it owns... And in less than two years they tripled the EBITDA of the business. And then they bought Healthline, they bought CNET. I mean, so they basically took their... And now the services part of their business is a tiny part of their business, and the SEO content part is a massive m- part of their business. But the same culture, the same playbook, and it's, it's an incredible business. Incredible group of people.
- SPShaan Puri
So can you explain what they're doing? So they buy these SEO businesses, which is, let's just take, take Bankrate as an example. People Google best-
- SPSpeaker
Yep
- SPShaan Puri
... mortgage rate, more current mortgage rates, whatever, and they, Bankrate has done the content work and the SEO work to be the top thing that shows up on Google. So then you click it, you go in, and they have like these affiliate offers, and that's all great.
- SPSpeaker
Mm-hmm.
- SPShaan Puri
And what,
- 32:40 – 41:00
The Four Big Levers
- SPShaan Puri
what Red did was they basically, uh, am I right that they bought a business that was like primarily SEO driven, and then they layered on paid to that? Is that the main thing that they did? Or what, what did they do to the assets?
- SPSpeaker
There's four major levers they pull. And the first thing I have to tell e- whenever I tell this story is, Rick... And i- it's the most unique culture. Like at some point, you guys, I just take you there and you gotta tour the campus and check it out, because you've never seen anything like it. And there's a great New York Time article where they describe it as like part Wall Street trading desk, part like Southern politeness, and part like hard-nosed direct response marketing, and that's exact- Like it's a very apt description. But anyway-
- SPSam Parr
Well, and that's why I wanted to ask you about it, because Rick seems like an anomaly. Like he seems like a, like a... Like this is normally like kind of a n- This could be a shady industry.
- SPSpeaker
Yeah.
- SPSam Parr
It often is-
- SPSpeaker
Yeah
- SPSam Parr
... a shady industry.
- SPSpeaker
Yep.
- SPSam Parr
He doesn't seem like a shady guy. He-
- SPSpeaker
No
- SPSam Parr
... and he seems like a, like people love working there, which is rare.
- SPSpeaker
He's one of the most special people I've ever met in my... He's one of the most special people in the world, I think.
- SPShaan Puri
What would we notice if we toured the campus? What would we see?
- SPSpeaker
It's funny you ask that. So one of my requests to him when, when they invest, I, I wanna shadow your leadership team for a week. Me and my, my 10 leaders are gonna shadow your leaders, and I wanna see what you guys do. And what you'd find is, you know, these things that are like startup adages, they've done at a scale of 5,000 people. Every meeting is short. Every meeting starts with a bottom line. Numbers are the only thing that is ever talked about, and levers. And every person is basically trying to optimize more EBITDA in, in any discussion they're having. And they don't talk about the work that gets done as i- independent of that, right? It's like another example is like they shape teams. So, and you know, for digital marketers, they don't say like, "We have a client team and we have a marketing team and we have..." They, they go, "We have like team click-through rate, and we have team conversion rate, and we have team traffic volume." Like they literally organize people by the KPI that they're trying to drive so that there's a deep, deep focus into it. They have these really cool things called business reviews, where basically Rick and the leadership team sits and you have 20 minutes to come in, give an update on your business. Real decisions are made about the business, and he does like 40 of tho- or like 40 over two days, basically. So it's a high energy, very smart... It's like, it, it's a very unique culture. But anyway, so the culture is the starting point by far, because without it I don't think any of this works. They have four main levers. The first is improvement of traffic acquisition, both paid and organic. So to your point, Shaan, th- they'll, they'll layer on paid in a really smart way. They think a lot about cost per visitor and revenue per visitor, and get that equation working extremely well. But they'll do a lot of SEO as well, and they'll get volume up, right? So I think, I remember high level, when they bought The Points Guy, I'm making these numbers up, but it was doing 70 cents in revenue per visit and maybe 40 cents in cost per visit. And w- two years later it was doing like a dollar, a $1.70 [laughs] in revenue per visit and like 90 cents in cost per visit, but the visits were up by like a factor of two or something like that, right?
- SPSam Parr
Mm-hmm.
- SPSpeaker
So, so first lever is traffic acquisition. Second lever is they're extremely good at onsite optimization. If you guys pull up The Points Guy or any of those things now, you'll say, "Wow, uh, Platinum American Express is plugged here, but it's plugged in a smart way. But I wanna click on it, but it doesn't feel too salesy." They're very good at getting basically the onsite optimization to be significantly higher. The third lever is they're incredible geniuses when it comes to pricing to the efficient frontier of a customer's curve. You guys know what I mean when I say that?
- SPSam Parr
You're using a lot of words, my friend.
- SPShaan Puri
Yes. Independently. But when you put them together that way, it was just a combination I wasn't familiar with.
- SPSpeaker
So when you're a credit card... So you're American Express, right? And American Express i- is probably worth, willing to pay $700 per credit card application. But their person on their side will pay 200 if they can, right? So, but the only way... If you can figure out the exact willingness to pay for an incremental customer by your customer in their business, your profits skyrocket. So they basically, they basically... You could ca- The simple way to say it is they're good at pricing. They, they can really charge more for what they get. And this, I'll tell you a funny story. The guy who's, who's retired now, but he's a good friend of mine, he's a Southern dude. He's very u- like disarming, but then he's smart as shit. And he's like, "Jesse, we were 60 days from close. We were gonna close this Bankrate deal, and their team told me there was a bidded auction for how you bought credit card applications, and no technology could beat it." And he said, "I looked at it and I said- Discover's only paying 500 for an application, and they said they're willing to pay 900. Why are we not charging them 900? He's like, "Well, that's how the algorithm works." He's, like, buying this deal. He goes, "The day we closed the deal, Jesse, I threw away that algorithm. I pulled up a spreadsheet. I called all the customers. I said, 'What are you willing to pay? What are you willing to pay?' I got them, I charged them exactly what they were willing to pay, and I got 20% more in EBITDA overnight."
- SPShaan Puri
[laughs]
- SPSpeaker
"Within, within the first month I owned the business." And so that's the third lever they're good at. And then the fourth lever is they're, they're not crash-and-burn people, but they're very thoughtful about... And w- when, when they invested in Ampush, I cut the headcount under their sort of tutelage by more than half, and our revenue grew during that time. So they're very good at, like, truly challenging the, the bloat in an organization and being like, "How many people do we actually need?" Like, one story you guys will love is one of their executives said they bought some, like, government-owned thing. It's a really weird business that mails you all the mailers when you move. I'm forgetting the name of it right now, but it's this-
- SPShaan Puri
I hate that. [laughs]
- SPSpeaker
So it's, it's... It actually was owned by the USPS, and then it got-
- SPShaan Puri
I hate that
- SPSpeaker
... now Red, now Red Ventures owns it. I go, "So how'd you decide how to reduce the headcount?" He goes, "We took the top three managers in the company and we held a draft. So we basically put everyone's name on the board and, and we said, 'You... There's only 40 people of 80 staying. Now go draft your best people.'" And again, they, you know, they're, they're compassionate with obviously the people they let go. It's not, that's not, it's not meant to be a negative towards them. But, like, these organizations, they're very good at leanly staffing these organizations.
- SPShaan Puri
Right.
- SPSpeaker
So those are the four big levers, and that's how they get the kind of results they get.
- SPShaan Puri
That's dope. I appreciate the, uh, the Red Ventures masterclass. That's great. They're, they're k- like a juggernaut that I didn't know much about in terms of how they actually operate.
- SPSam Parr
Your boyfriend, uh, the guy from Silver Lake, the guy you love. Who's the guy? What's his name that you have a crush on? Uh...
- SPShaan Puri
I should probably know his name if he's my boyfriend. Uh, E- Eagan. What's his name? Eagan?
- 41:00 – 46:30
Calling Zuck's cell
- SPSpeaker
other things, I'm like, this seems like such an obvious path to create a tremendous amount of value that's, that's, like, better than the venture path for so many different reasons. More apt, uh, and more just re- You know. But yeah, I think, I think everyone should look at it in their space. And by the way, I think... Well, I've been approached multiple times and pitched on this, and it's on my list of, like, creative AI meets roll-up. So Jesse, go, let's go buy a creative agency, redo their processes with AI, right? Then once you've figured that out, let's go buy 10 more of them, and not only will you be able to roll up and get the, all this multiple arbitrage, but you will create a much more profitable business. So I think there's a lot of strategies out there, and I would say, like, I think a lot you can do with private equity, without private equity, but, but the founders of running these businesses should be the ones leading them, and the more the founder has the strategy, the better they're gonna do with the PE firm if they ever need the capital to go do it.
- SPShaan Puri
Right. You mentioned AI. I wanna ask you about that, because you were early to the social networking wave. I think you were doing, like, a social networking type of thing in the first year of Facebook.
- SPSpeaker
Yeah.
- SPShaan Puri
I think there's some story where Zuck called you, and, uh-
- SPSpeaker
I called him on his cell phone pretending to be somebody else. That was a good one.
- SPShaan Puri
Oh, you called Zuck.
- SPSpeaker
[laughs]
- SPShaan Puri
Uh, tell that story, by the way. [laughs]
- SPSam Parr
Who did you pretend to be? [laughs]
- SPSpeaker
So summer of '05, we're like, "Facebook's... Oh my God, Mark, Mark Zuckerberg. He's a year old. He's our age, right?" We're like, "He's our age. He's, like, gonna crush it, but he's never gonna go into high school. Somebody should start a high school Facebook." And we're like, "Why not us?" So we started The High List. I have, like, I have, like, the docs. We had these little icon- iconography and all this stuff. We basically rebuilt a clone of Facebook. And at the beginning of the summer, we went to go buy hsfacebook.com, and some kid at Columbia, I don't even remember his name, maybe he's listening and he can, he can phone himself, he owns it. And he goes, "Well, I'll sell it to you for, like, $20,000." And we're college kids. We're like, "No, thanks. We'll call it The High List." And we say peace. We build the whole product. We launch it. Literally on the eve of the launch, he calls us and he goes, "Mark Zuckerberg wants to buy HS Facebook, so I'm giving you a last chance, buddy." Like- ... you can get it. And, and I was like, "Oh my God, we need..." And I was like, uh, my first question was, "Is he gonna launch in high schools?" Like, yeah, he says he is. And I'm like, "No, are you sure?"
- SPSam Parr
[laughs]
- SPSpeaker
Like, I think the guy's bullshitting me.
- SPSam Parr
[laughs]
- SPSpeaker
So I'm like, "Prove it." So he forwards me the email from Zuck, and this is not... This is just a guy named Mark Zuckerberg. He's not Zuck Zuck today, right? And the guy includes a 917 area code number. Sorry, Zuck, uh, your area code's 917 on your cellphone. And I don't know what the rest of it was, I don't remember. But basically, it has a cellphone number. So I'm like, "Okay, how do we call and how do we verify this is true?"
- SPSam Parr
[laughs]
- SPSpeaker
So I call Zuck. By the way, I call him from my summer internship office at Bain Capital. So I'm, like, sitting inside some finance company, calling him. And I go, "My name is Tom Goldberg. I'm partners with this guy Bob."
- SPSam Parr
[laughs]
- SPSpeaker
"And we own HS Facebook together. So I wanna make sure that you're not, like, I'm not getting cut out of this deal that you apparently have with him." And he goes, "Yeah, I'm gonna buy it from him, and you need to sort that out with him." And then I, I go, "Well, what are you gonna do with it?" And I kid you not, he spends 30 minutes, and to, to his credit, he outlines the entire strategy that Facebook has executed. He goes, "First we're gonna go to high schools, then we're gonna go to workplaces, then we're gonna go into pods, then we're gonna..." Like, he had a, the whole strategy. This is in '05, dude. This is a year into Facebook.
- SPSam Parr
And he's, like, 21?
- SPShaan Puri
He's like, "Then we'll start wearing chains and cool shirts."
- SPSam Parr
[laughs] Yeah.
- SPSpeaker
He didn't know that.
- SPShaan Puri
Right around the age of 25.
- SPSpeaker
He's like 20, yeah, he's like 22 or what. I'm 21.
- SPSam Parr
[laughs]
- SPSpeaker
And then at the... He's like, "Wait, by the way, what was your name again?" And I'm like, click. [laughs]
- SPShaan Puri
Tom Goldberg.
- SPSam Parr
[laughs]
- SPSpeaker
And needless, needless to say, our high school Facebook plan did not work out.
- SPSam Parr
[laughs]
- 46:30 – 58:45
Noah Kagan's $100M mistake at facebook
- SPSpeaker
a month in Facebook stock." [laughs]
- SPSam Parr
[laughs]
- SPSpeaker
"How are you gonna match that?" [laughs] And I'm like, I'm like, "Dude, what are... What?" [laughs]
- SPShaan Puri
Yeah, why are you here?
- SPSpeaker
"Good to meet you, buddy. We- I'll see you later." [laughs]
- SPSam Parr
That is absolutely insane. Uh, Shaan, have you heard the story about Noah Kagan, and how Noah was hired to work at Facebook? Noah was the 32nd or 30th employ- employee. And basically what happened is he, uh, was out at a party, and he was drunk or something like that. And he tells a reporter, a TechCrunch reporter, [tapping] "We're gonna launch this thing and that thing, and it's gonna be the best thing ever," and it becomes a news article the next day. And Zuck goes to his desk and he goes, "You're fucking with my company. You're out."
- SPShaan Puri
[laughs]
- SPSam Parr
And he fires him on month nine.
- SPSpeaker
Wow.
- SPSam Parr
So Noah was three months away from his first vest. And Noah's told me, he goes, "Had I just made it that three months, those, that, those shares today would be worth about $100 million." Those three months, all because he kinda-
- SPSpeaker
Opened his mouth
- SPSam Parr
... you know, had a, had a big mouth when he was 21 and drunk at a party.
- SPSpeaker
He was, he was Ampush's first Facebook ads client, believe it or not. AppSumo was.
- SPSam Parr
That's awesome.
- SPSpeaker
I bought his first c- I got his first customers for him.
- SPSam Parr
Yeah, and now it's, like, you know, a business that does 100 million a year in revenue.
- SPSpeaker
Amazing.
- SPSam Parr
And so it kinda worked out, but it would've worked out a lot easier if he, uh, kinda kept his mouth shut.
- SPSpeaker
Yeah. I, you know, but my thought... I don't know how you guys feel about that. I, I s- I've done that math, and I'm like, but I don't think I could've worked... Like, I don't wanna work for someone.
- SPSam Parr
Of course. You can't look back-
- SPSpeaker
I think that's-
- SPSam Parr
... and be like-
- SPSpeaker
Yeah
- SPSam Parr
... you, yeah.
- SPSpeaker
But I, even if I could even now make that decision, I'm like, I don't think I would've wanted to work for Facebook or anywhere for that, that long, or, like-
- SPSam Parr
Dude, I would.
- SPSpeaker
Really?
- SPSam Parr
[laughs] That would've been awesome.
- SPShaan Puri
Well, well-
- SPSam Parr
What were you gonna say, Shaan?
- 58:45 – 1:01:00
What's the thing you can't not do?
- SPSpeaker
Yeah. You know, and I've done, I think, Shaan, you know this, I've spent probably the better part of six or seven years on this personal growth journey which has turned into like a spiritual journey. And the, the defining moment came for me maybe three years in when my coach was like, "What's the one thing you can't not do?" It's like a really weird question. And the exercise for, you know, you can do it, Sam, right now, is what's the one thing you can't not do? Write down a few sentences and then every week look at those sentences and see if they seem to grow with you.
- SPSam Parr
That's a good idea.
- SPSpeaker
And, and in one funny way he's like, like, "What's the thing that comes in the room when you show up? Like what's the stench?" 'Cause his th- his point was we try to make purpose this far out thing we have to go get, and it's actually the thing already inside of us that we just need to like tap into and live more fully. And for me it was I love helping other people like be the best versions of themselves, like raise their game to the next level of what they're capable of. And even in this podcast, like I think I taught you guys two, two new things. Like it just, it comes out, it's not purposeful unles- and I've made it more purposeful now. But like at the time it wasn't, but it was a thing any one of my friends would tell you about me, any of my employees would tell you about. Like, "Dude, Jesse walks in and like the bar goes up and it's like an exciting go up." And, and so I've re- like one, one of the interesting examples of this, he goes, "So how do you keep your to-do list, Jesse?" And I was like, "Uh, initiatives or clients." And he's like, "What if you kept your, your to-do list based on your people you worked with, like executives, and how you're helping them be the best versions of themselves?" He's like, "You'd probably still like get the work done that you need to get done, but you'd do it in this very inspired way." And like Gateway X, I mean, Gateway X is a whole function of me going, "The thing I wanna do is help other people learn and grow." I'm not the CEO of any of these companies. Like m- I, now I do actually keep my to-do list that way. I don't write Growth Assistant or Aux, I write Adrian and Casey, and I'm like, "How am I helping those, those people?" And I find it's a weird thing. When I frame my success or my life through the P&Ls of those businesses, I get very like neg- like I'm not, I'm not as powerful. I'm like a, you know, more, uh, scarce-minded person. And when I frame it as the like how do I help those individuals, which is the same shit because they're running the businesses, I'm like creative and I'm happy and I'm, I'm more flowing. And so for me it's like that's the thing and it feels ev- really energizing for me. Like I think I could do it for a really long time. Um, and obviously the setup, the way I've got it set up matters a lot too. Like I'm, you know, not running any of the individual businesses and I don't think I want to. I don't wanna run staff meetings. I don't wanna run comp plans,
- 1:01:00 – 1:07:13
Nelly performs at Jesse's birthday party
- SPSpeaker
hiring pro- like all these things, I did it. You guys have done it. Like it's not what I wanna do, but I do wanna help grow each of these businesses.
- SPSam Parr
Dude, you're awesome. I appreciate you doing this.
- SPSpeaker
Thanks, man.
- SPSam Parr
What do you think, Shaan?
- SPSpeaker
This was fun.
- SPShaan Puri
Thanks for hopping on. It's great to see you. By the way, how'd you get Nelly at your birthday party? What was that about? [laughs]
- SPSam Parr
[laughs]
- SPSpeaker
[laughs]
- SPShaan Puri
Tell that story before we go.
- SPSam Parr
Dude.
- SPShaan Puri
Give us the quick one.
- SPSpeaker
So I turned 40 in May, as you guys know, and I have a cool vi- video montage of the party. My wife threw an awesome party. But I've been telling all my friends about St. Louis since I was 18, so I went to college. I'm like, "St. Louis is the best city," whatever. And everyone's like... I was like, "I'll move back there one day." They're like, "No, you're not." And then I moved back, and they're like, "Oh, shit, you moved back." And so I had 200 people in town who I'd been raving to about St. Louis for, like, 10-plus years. So I'm like, what's the most ridiculous thing you could do if you're me having your 40 birthday? Like, Nelly. I mean, you guys are similar, similar in age. From my high school to early college, Nelly was, like, the biggest rapper on the planet, and he's from my hometown.
- SPSam Parr
Nelly was our guy. He was the first famous St. Louis guy. And it doesn't matter what race you are, where, how old you are-
- SPSpeaker
Music taste
- SPSam Parr
... Nelly was like our son.
- SPSpeaker
Dude-
- SPSam Parr
He made us so proud
- SPSpeaker
... if you're in your 30s or 40s, just close your eyes. I'm just gonna say a few words that'll just take you back.
- SPSam Parr
[laughs]
- SPSpeaker
Country Grammar, Air Force 1s, E.I., [laughs]
- SPSam Parr
Uh-oh
- SPSpeaker
... Cotton Her. Oh my God, like, just the memories that come with those words.
- SPSam Parr
Oh.
- SPSpeaker
[laughs] So, so, so I'm like, all right, I'm, yeah, I'm, you know... What's a ridiculous thing I could have at my party? I'm like, have Nelly perform there. So my wife goes through the normal channels. They're like, "You know, he basically doesn't do this." Right? So he's like, "Look, it's 300,000 just as a starting price. By the time you do it all, it's half a million dollars." And I'm like, "I, I, I wanna die with zero, but, like, that's a little, little rich for my blood."
- SPSam Parr
[laughs]
- SPSpeaker
So-
- SPShaan Puri
I don't wanna live with zero. [laughs]
- SPSpeaker
Yeah. So I'm like, all right, we're not gonna do that. And then I kind of am sad for a few months, and then, and then the entrepreneur in me goes, wait, come on, there's gotta be another way to approach this, right? So St. Louis is not a big place. I ask a couple people. I go, "You know Nelly's people, right?" And I'm like, "Can you introduce me?" And so I get to know... They're great. By the, there's this guy, Mike Chafin. There's these won- wonderful guys. I get to know them, and, you know, they introduce me as this guy who's, like, an expert digital marketer e-commerce guy. So I'm like, "Hey, what's going on? What's going on in your world?" Oh, da, da, da, da, a, you know, Nelly's actually working on two big e-commerce businesses, like, hi- his team is. And I go, "Ooh, tell me more." And they, they tell me all about it. And I'm like, "Okay, well, here's the thing you should think about, and make sure you tag this pro..." And, and they're like, "Oh, wow, you know a lot about this." And I'm like, "Okay, how can I be helpful," right? And, and then I just basically have been working with them and, right, here's a Shopify app, do this. Here's a good contractor for this. You know, helping their team get it going. And at some point it came out, the aux business came out, and I'm like, "Yeah, I charge private equity firms, like, 2, $300,000 to do this."
- SPSam Parr
Nice.
- SPSpeaker
Right? And they're like, "Oh, but you've just been doing it for free. Like, what can we be helpful?" I'm like, "It's funny you ask."
Episode duration: 1:07:13
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